Question

he following information pertains to Lightning Inc., at the end of December: Credit Sales $ 20,000 Accounts Payable 10,000 Accounts Receivable 10,400 Allowance for Uncollectible Accounts 400 credit Cash Sales 20,000 Lightning uses the aging method and estimates it will not collect 7% of accounts receivable not yet due, 15% of receivables up to 30 days past due, and 49% of receivables greater than 30 days past due. The accounts receivable balance of $10,400 consists of $7,000 not yet due, $1,700 up to 30 days past due, and $1,700 greater than 30 days past due. What is the appropriate amount of Bad Debt Expense?

Answer 1

Answer:

What is the appropriate amount of Bad Debt Expense?

Bad debt expense $ 1,178  

Allowance for Uncollectible Accounts  $ 1,178

Explanation:

The total amount of Allowance for Uncollectible Accounts is a credit of $0,400

• Initial Balance  

Accounts Receivable $ 10,400  

Allowance for Uncollectible Accounts  $ 0,400

• The aging method indicates that the total amount must be :

            Acc. Rec    Allow.  

7%    $ 7,000     $ 0,490 Not yet due

15%   $ 1,700     $ 0,255 1-30 days

49%  $ 1,700     $ 0,833 more than 30 days

        $ 10,400 $ 1,578  

• It's necessary to entry the next journal entry to meet the amount indicated by the aging method.

Bad debt expense $ 1,178  

Allowance for Uncollectible Accounts  $ 1,178